"Interested Directors: Applicable Statutes, Cases, Guidance"

A director with a conflict of interest can pose a serious concern for a co-op or condominium board. Transactions in which a director has an interest (Interested Director Transactions) yet participates in board deliberations or decision-making can subject the co-op or condominium to litigation seeking to nullify the transaction as well as breach of fiduciary duty claims against board members.

Even if such lawsuits do not ultimately succeed, substantial legal fees may be incurred and a divisive and destabilizing impact on apartment owners and boards may result. However, what constitutes an interested director and the extent to which such a director can participate in board deliberations and actions is not always clear.

This column reviews applicable statutes and case law and provides guidance to boards and counsel on how to address the litigation risk and disruption that can result from Interested Director Transactions.

Related Files & Links